scotia wrote:Today I sold a Baronsmead Venture Trust VCT (previously Baronsmead VCT 2) which I purchased in March 2014 - i.e. just past the 5 year date. The (Sold Price + Dividends - Net Cost)/(Net Cost) expressed as a percentage was 62.38%. The Net Cost is the price I paid less the 30% tax relief. Not bad for 5 years. But If I ignore the initial tax relief and replace the Net Cost in the above equation with the Gross Cost (no tax relief), I get 13.66% - which is better than a Cash ISA, but is not impressive.
Hence my reason for re-cycling after 5 years.
This is very similar to my experience with VCTs. I first invested in 2006, with a 40% tax rebate. Although I got some very good 5 year returns, including from (believe it or not) Foresight 3 and 4, the bulk of the returns came from the up front tax rebate. With a 40% rebate, a return of 67% was achievable even if no investment gains were made. Similarly, with a 30% rebate, a 5 year gain of 43% was achievable with no investment gains.
Without the regular tax rebates from the now banned rollovers, the returns from most VCTs seem to have ranged from mediocre to awful. After 2006, apart from rollovers, I mostly invested in limited life VCTs as these have tended to be much more asset backed and/or lower risk opportunities such as Solar with FITs (now also banned) and did not come with the risk of having a big discount to NAV after 5 years.
I still hold some limited life VCTS in runoff and others I have been exiting as opportunities present themselves, such as the Foresight tenders, but I am in no rush to invest again. The series of rule changes have increased the risks with VCTS, but not the expected returns. I also think there is too much money being poured into VCTS, while the government has taken steps to reduce the pool of allowable investments. IMHO, a combination likely to lead to poor returns.
Ps, simply bunging money into a global tracker ETF such as SWDA would have returned about 85% over the last 5 years, although returns would not have been tax free, unlike with VCTs.